HW3_Answerkey - Homework 3 Answer Key 1 Tom and Wendy have...

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Homework 3 – Answer Key 1) Tom and Wendy have left the farming business. Each bought a clothing factory and they now produce ties and shirts. Wendy's PPF is represented by Shirts = 100-1/3Ties. Tom's PPF is represented by Shirts = 80-1/2Ties. Wendy started business by producing 180 Ties and 40 Shirts per hour, while Tom produced 90 Ties and 35 Shirts per hour. Later, they met and decided that each would fully specialize according to comparative advantages and then trade 100 ties for 42 shirts. What are the gains from trade for Tom?
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